Intellectual Hazard: How Conceptual Biases in Complex Organizations Contributed to the Crisis of 2008
Geoffrey P. Miller
New York University School of Law
New York University School of Law; New York University (NYU) - Department of Finance
November 4, 2009
NYU Law and Economics Research Paper No. 09-43
This paper identifies an important but previously unrecognized systemic risk in financial markets: intellectual hazard. Intellectual hazard, as we define it, is the tendency of behavioral biases to interfere with accurate thought and analysis within complex organizations. Intellectual hazard impairs the acquisition, analysis, communication and implementation of information within an organization and the communication of such information between an organization and external parties. We argue that intellectual hazard was a cause of the Crisis of 2008 and suggest that this risk may be an important factor in all financial crises. We offer tentative suggestions for reforms that might mitigate intellectual hazard going forward.
Number of Pages in PDF File: 40
Date posted: November 4, 2009
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